GORECKI v. CLEARVIEW ELECTRIC, INC.
Filing
39
OPINION. Signed by Judge Mark R. Hornak on 9/5/18. (bdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
KAREN GORECKI,
Plaintiff,
V.
CLEARVIEW ELECTRIC, INC.,
Defendant.
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2: I 8-cv-00035
OPINION
Mark R. Hornak, United States District Judge
Karen Gorecki filed a putative class action against Clearview Electric, Inc.
("Clearview"), alleging that Clearview breached its service contract by not varying price based
on wholesale market conditions, and charging Gorecki and the putative class substantially higher
rates as a result. In the alternative, Gorecki alleges that Clearview unjustly enriched itself at her
and the class's benefit by charging excessively for electricity. Clearview now moves to dismiss
the Amended Complaint for failure to state a claim upon which relief can be granted. For the
reasons that follow, Clearview's Motion to Dismiss will be granted in part and denied in part.
I. BACKGROUND
The Court takes the following facts, drawn from Plaintiffs Complaint, as true. In 1996,
Pennsylvania deregulated its retail energy market. (Amended Class Action Complaint, ECF No.
21 ("ECF No. 21"), ,i 12.) Before this move, local utility companies exclusively supplied and
distributed gas and electricity. (Id) More recently, Pennsylvania changed its energy regulations
to encourage competition among energy providers. (Id.) One goal of this scheme is for electric
generation suppliers ("EGSs") to lower energy costs. (Id.) EGSs purchase energy from
companies that produce it and then sell that energy to consumers. (Id. ,i 14.) They may buy
electricity in the wholesale market, own their own electricity facilities, or purchase electricity
futures contracts in advance. (Id.) EGSs do not, however, deliver electricity. (Id.) Clearview is an
EGS. (Id.
,r 12.)
If a customer switches to an EGS, he will have his energy supplied by the EGS but
delivered by his existing utility. (Id.
,r 15.) That utility will continue to bill the customer for the
energy supply and delivery costs. (Id.) The only difference the consumer will see is which
company sets the price for the energy supply. (Id.) The energy supply charge (based on the
customer's kilowatt hour usage) is calculated using the supply rate charged by the EGS. (Id.
,r
16.) For example, if the customer uses 300 kWh of electricity at a rate of $.11 per kWh, the
customer will be billed $33.00 for his energy supply. (Id.)
The Federal Energy Regulatory Commission ("FERC") regulates the wholesale
electricity market, which, in Pennsylvania's case, is administered by the PJM Interconnection.
(Id.
,r 35.) Utilities and EGSs purchase electricity at the wholesale level and then resell it to their
customers at a retail rate. (Id.)
Around October 2012, a Clearview representative solicited Plaintiff to change her utility
service from Duquesne Light Company ("Duquesne Light") to Clearview, promising she would
save money if she made the switch. (Id.
(Id.
,r 26.) Plaintiff switched to Clearview around that date.
,r 27.) Plaintiffs plan worked as follows:
for electricity for six months. (Id.
,r 28.)
she was placed on an introductory, fixed-rate plan
At the end of the six months, the plan automatically
renewed for an additional twelve months. (Id.) Around February 10, 2014, Clearview sent her a
letter stating that it was "committed to providing [her] with continued value" and notifying her
that her electricity plan would continue on a variable rate plan. (Id.
,r 29.) The letter contained the
"Sales Agreement and Terms of Service" applying to the variable rate plan. (Sales Agreement
2
and Terms of Service, Compl. Ex. A ("Sales Agreement").) The Sales Agreement reads like a
contract, defining essential terms, setting forth billing and payment terms, providing the process
by which parties may cancel the agreement, and, important for the Court's purposes here,
including a price disclaimer. (Id.)
The Sales Agreement set forth that the new electricity rate was a variable, month-tomonth rate "based on wholesale market conditions." (Id.) The Sales Agreement further states that
"Clearview sets the generation supply rate that you pay" and the "[p]rice per kWh includes
Electric Generation Supply, Transmission Charges, and Estimated State Taxes." (Id.) Plaintiff
paid this rate from approximately May 2014 until approximately October 2017, when she
canceled her service. (ECF No. 21,
~
33.) Between September 11, 2016, and August 13, 2017,
Clearview's rate was .1299/kwh each and every month. (Id.
~
38.) During those same months,
the wholesale market price 1 fluctuated; it was as low as .0484/kwh and as high as .0836/kwh.
(Id.)
On these facts, Plaintiff avers that Clearview breached the terms of the agreement (Count
I), and in the alternative, that Clearview unjustly enriched itself at the expense of Plaintiff and
the other Class members (Count II). Plaintiff brings this action on behalf of herself and similarly
situated Clearview customers in the Commonwealth of Pennsylvania. Clearview moves to
dismiss Plaintiffs claims pursuant to Federal Rule of Civil Procedure 12(b)(6).
11.LEGALSTANDARD
Federal courts must dismiss cases that fail to state a claim upon which relief can be
granted. Fed. R. Civ. P. 12(b)(6). Complaints therefore must allege facts "sufficient to show that
the plaintiff has a 'plausible claim for relief."' Fowler v. UPMC Shadyside, 578 F.3d 203, 211
1
Plaintiff calculates the wholesale market price as a combination of weighted locational marginal pricing and other
PJM Interconnection charges (such as capacity and ancillary services). (Id, n.11.) Plaintiff avers that these charges
are identified in Clearview's Sales Agreement as "Electronic Generation Supply." (Id)
3
(3d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). When determining whether
dismissal is appropriate, the Court must: "(1) identify[] the elements of the claim, (2) review[]
the complaint to strike conclusory allegations, and then (3) look[] at the well-pleaded
components of the complaint and evaluat[e] whether all of the elements identified in part one of
the inquiry are sufficiently alleged." Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). The
Court "accept[s] all factual allegations as true, construe[ s] the complaint in the light most
favorable to the plaintiff, and determine[ s] whether, under any reasonable reading of the
complaint, the plaintiff may be entitled to relief." Blanyar v. Genova Prods. Inc., 861 F.3d 426,
431 (3d Cir. 2017) ( citation omitted). The Court may consider "only the complaint, exhibits
attached to the complaint, matters of public record, as well as undisputedly authentic documents
if the complainant's claims are based upon [those] documents." Hartig Drug Co. Inc. v. Senju
Pharm. Co. Ltd., 836 F.3d 261,268 (3d Cir. 2016) (quoting Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010)).
III. DISCUSSION
A. Breach of Contract (Count I)
To establish a breach of contract under Pennsylvania law, a plaintiff must establish "(l)
the existence of a contract, including its essential terms, (2) a breach of the duty imposed by the
contract and (3) resultant damages." CoreStates Bank, NA. v. Cutillo, 723 A.2d 1053, 1058 (Pa.
1999). Pennsylvania law requires that an energy supplier's contract include a statement
informing the customer "on what basis prices will vary." 52 Pa. Code § 54.5(c)(2)(i)-(ii). The
parties concede the existence of a contract and that the essential terms include a statement that
the rate will be calculated based on wholesale market conditions. (ECF No. 31, at 2; ECF No. 26,
at 5.)
4
Plaintiff argues that Clearview breached the contract because it contains an express
provision that her plan's "[r]ate is based on wholesale market conditions" and Clearview did not
actually base its rates on those conditions. (ECF No. 21,
,r 42.) Her argument relies on two core
allegations. First, she avers that Clearview's rates "were not commensurate with rates otherwise
available in the market," (Id.
,r
32), because "the rates that Pennsylvania utilities such as
Duquesne Light charge are an accurate reflection of rates that are based on wholesale market
conditions," (Id.
,r
34 ), and so the fact that Clearview' s rate was "substantially higher" than
Duquesne Light's indicates that Clearview was not varying its prices according to wholeale
market conditions. (Id.
,r 36.) Second,
she alleges using data from the PJM Interconnection that
"[a]s wholesale market price fluctuates, Clearview's variable rate does not correspond to these
fluctuations.
Instead, Clearview's variable rate remains significantly higher than the
corresponding market price." (Id.
,r 41 (emphasis omitted).)
Clearview argues that both of these core allegations are conclusory and contrary to
precedent, and that Plaintiffs view of the wholesale electricity market is oversimplified to the
point of falsity. (ECF No. 26, at 11-20.) Clearview directs the Court's attention to a recent Third
Circuit opinion in Orange v. Starion Energy PA, Inc., 711 F. App'x 681 (3d Cir. 2017). There,
the Court considered allegations that the defendant ESG breached its contract term that its
variable rate "may change in response to market conditions," when the plaintiff averred that the
defendant was charging him nearly three times the rate charged by his local utility. Id. at 682-83.
The Court concluded that the plaintiffs complaint was deficient because "a simple comparison
of [defendant's] local utility rate to the local public utility rate is not sufficient to support the
reasonable inference that [defendant] did not adhere to that formula." Id. at 684. According to
Clearview, Orange's logic controls this case, and Plaintiffs Complaint must be dismissed.
5
The factual allegation in Plaintiff's complaint is that "Clearview charged variable rates
for electricity that were not based on wholesale market conditions." (ECF No. 21, ,r 61.) Plaintiff
has provided two comparison tables in support: one comparing Clearview's rates with Duquesne
Light's rates over a twelve-month period from September 11, 2016 to August 13, 2017, (ECF
No. 21,
,r 33),
and one comparing Clearview's rates with the wholesale market price over the
same period, (ECF No. 21,
,r 38). Plaintiff asserts that she calculated the wholesale market price
based on "weighted locational marginal pricing (LMP) and other PJM charges (i.e., capacity,
ancillary services, etc.)." (ECF No. 21, at 12 n.11.)
Clearview is correct that because Plaintiff alleges that Clearview' s rate did not vary based
on the wholesale rate, the Court need not consider variation from Duquesne Light's rate (another
retail rate) in evaluating her averments. The Third Circuit has made that much clear in Orange,
as have other United States District Courts considering variations on Plaintiff's argument. See,
e.g., Landau v. Viridian Energy PA LLC, 223 F. Supp. 3d 401, 408 (E.D. Pa. 2016) (dismissing
plaintiff's breach of contract claim where the contract provided that variable rates "may fluctuate
each month based on wholesale market conditions" but plaintiff presented only comparisons to a
local utility's retail rates); Zahn v. N Am. Power & Gas, LLC, 2015 WL 2455125 (N.D. Ill. May
22, 2015) ("Zahn's allegation that NAPG's prices did not track Commonwealth Edison's pricesomething the contract explicitly states is not guaranteed-does not constitute an allegation that
the rate NAPG charge did not vary based on [market prices and applicable taxes]."), vacated on
other grounds, 847 F.3d 875 (8th Cir. 2017).
But that is not all Plaintiff avers. She has also set forth facts regarding wholesale market
conditions to support her claim that Clearview did not base its price on them. Clearview argues
that Plaintiff's connection between Clearview's prices and the wholesale market price from the
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PJM market is "apples to bananas," (ECF No. 26, at 2), and that Plaintiffs definition for
"Wholesale Market Price" in her comparison table is factually baseless, (id. at 16). According to
Clearview, wholesale market conditions cannot be directly linked to a wholesale market price.
Therefore, the price available on the wholesale market (which Plaintiff calculated in part using
publicly available rates from the PJM Interconnection) is not an accurate reflection of "wholesale
market conditions." That may be so, but the Sales Agreement provides no definition for
"wholesale market conditions." Rather, the Sales Agreement states that its "[p]rice per kWh
includes Electric Generation Supply, Transmission Charges, and Estimated State taxes." (ECF
No. 21-2, at 3.) None of these terms is defined.
While the Sales Agreement expressly states that "Clearview sets the generation supply
rate that you pay," (ECF No. 21-2, at 3), Clearview's discretion is not unlimited. The Sales
Agreement also provides that the rate will be "based on wholesale market conditions."2 Nor,
unlike in Orange, did Clearview list factors besides "wholesale market conditions" or list other
territories to which the rate fluctuation would be linked. See Orange, 711 F. App'x at 682 (listing
the contract terms, including that "[t]he Variable Rate may change in response to market
conditions in any or all of the PJM, NEISO, NYISO, and MISO territories, including such
factors as electricity market pricing, applicable taxes, transmission costs, utility charges, and
other market price related factors, as determined in Starion's discretion"). Indeed, Plaintiffs
factual averments resemble those in other cases where a breach of contract claim survived a
motion to dismiss. See, e.g., Melville v. Spark Energy, Inc., No. 15-cv-8706, 2016 WL 6775636
(D.N.J. Nov. 15, 2016) ("The Complaint notes that the CDS stated Spark charges energy prices
based on market conditions; alleges that Spark breached that provision by setting rates higher
2
Clearview concedes that it does not have "unlimited discretion to charge whatever rate it wants." (ECF No. 32, at
5.)
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than and unrelated to those of other energy suppliers; Plaintiffs performed their obligations under
the contract; and Plaintiffs paid more for energy as a result of Spark's breach. The Complaint
supports these contentions by attaching a copy of the CDS and listing rates billed by SPARK and
another energy provider. Such evidence is enough to show a plausible breach of contract claim ..
. ."); Basile v. Stream Energy Pa., LLC, No. 15-cv-01518, 2016 WL 4611443 (M.D. Pa. Sept. 6,
2016) (denying defendant's motion for judgment on the pleadings when "Plaintiff plainly alleges
that Defendants' rate changes 'bore no reasonable relationship to market conditions."' (quoting
complaint)).
Given that the Sales Agreement here does not define "wholesale market conditions,"3
Clearview proffers "components of generation service [that] are included in the phrase." (ECF
No. 26, at 7.) Clearview contends that "[s]pecific cost elements identified by the PaPUC for
inclusion in generation service are wholesale energy, capacity, ancillary, applicable RTO
administrative and transmission cost, congestion costs, supply management costs, other
administrative costs, applicable taxes and costs for alternative energy portfolio standard
compliance." (Id. at 7 (citing 52 Pa. Code § 69.1808).) The Court has reviewed the relevant
Pennsylvania regulations, including § 69.1808, and found that the price-to-compare ("PTC"), the
"line item that appears on a retail customer's monthly bill for default service" is "equal to the
sum of all unbundled generation and transmission related charges to a default service customer
for that month of service." 52 Pa. Code § 69.1803. The cost elements listed in§ 69.1808 to be
3
In her briefing, Plaintiff makes the argument that the Sales Agreement "Iimit[s] market conditions to 'your Local
Distribution Utility ("LOU")."' (Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss
Plaintiff's First Amended Complaint, ECF No. 31 ("ECF No. 3 I"), at 13. The Sales Agreement does not define
market conditions this way, and that language is part of the sentence "The PUC regulates the distribution rates of
your Local Distribution Utility ("LDU")." ECF No 21-2, at 3. The Court declines to read this language as limiting
the scope of the term "wholesale market conditions."
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included in the price-to-compare are the ones that Clearview argues are included in "wholesale
market conditions."
However, "default service" in § 16.1803 is defined as "electric generation supply service
provided to a default service program to a retail electric customer not receiving service from an
EGS." Id. (emphasis added). That is, an EGS such as Clearview, unlike a default service program
like Duquesne Light, is not required to include its own calculation of generation supply as a
price-to-compare. Indeed, the price-to-compare is designed for consumers to be able to compare
the price the EGS is charging with the default service price. See Investigation of Pennsylvania's
Retail Electricity Market: Intermediate Work Plan, No. 1-2011-2237952, 2011 WL 6838044 (Pa.
P.U.C. Dec. 15, 2011) ("Placement of the default service PTC on the monthly electric bill is
intended to let the customer know the price that he or she is paying for default service so the
customer can then use this information when shopping for competitive generation supply.") It
may well be that Clearview, like Duquesne Light and other default service programs, includes
the cost factors identified above in the rate that it passes on to consumers. But none of these
factors is listed in the Sales Agreement's reference to "Electric Generation Supply."
The alleged Clearview rate never varies over the twelve months at issue-it holds steady
at .1299/kwh even when the alleged wholesale rate varies from .0836/kwh down to .0521/kwh.
(ECF No. 21, 138.) At this stage of the case, the Court must consider the permissible inference
that the other factors that Clearview identifies in the Sales Agreement-transmission charges and
estimated state taxes-would not wholly account for this fluctuation. Clearview argues that its
rate does not need to "mirror" the wholesale rate, but that is not what Plaintiff has averred. She
has instead alleged damages as a result of Clearview's charging rates that were not based on
wholesale market conditions. (ECF No. 21, 162.)
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Clearview has raised a number of arguments that, although they may ultimately prove
meritorious, are not appropriate for resolution at this stage, when the Court must draw all
reasonable inferences in Plaintiffs favor. For instance, Clearview argues that "wholesale market
conditions are based on many factors besides ... the wholesale market price." (ECF No. 26, at
16.) However, Plaintiff has plausibly alleged that Clearview did not follow its Sales Agreement
term to "base[]" its rate on "wholesale market conditions" by averring facts supporting an
inference that despite changes in those conditions, Clearview's rate never changed.
Drawing all reasonable inferences in Plaintiffs favor, as the Court must, the Court
concludes that Plaintiff has stated a facially plausible claim for breach of contract.
B. Unjust Enrichment (Count II)
The parties concede the existence of a contract. (See ECF No. 21,, 58; ECF No. 32, at
8.) "Under Pennsylvania law, the doctrine of unjust enrichment is inapplicable when the
relationship between the parties is founded upon a written agreement or express contract .... "
Grudkowski v. Foremost Ins. Co., 556 F. App'x, 165, 169-170 (3d Cir. 2014) (quoting Wilson
Area Sch. Dist. v. Skepton, 586 Pa. 513, 520 (2006)). A claim for unjust enrichment may be
pleaded in the alternative to other contract claims, but "such alternative pleading is plausible
only when the validity of the contract is itself actually disputed, making unjust enrichment a
potentially available remedy." Id. at 170 n.8 (emphasis added). Because the parties do not
dispute the validity of the contract, the Court will grant Defendant's Motion to Dismiss, without
prejudice, as it relates to Count II of the Amended Complaint. See id. ("Here, [the parties] had a
contractual relationship, the existence and validity of which are not challenged. Thus [the
plaintiffs] claim for unjust enrichment, even when pied in the alternative, was appropriately
dismissed.").
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IV. CONCLUSION
For the foregoing reasons, the Court concludes that Clearview's Motion to Dismiss will
be granted in part (as to Count II) and denied in part (as to Count I).
An appropriate Order will issue.
Mark R. Hornak
United States District Judge
Dated: September 5, 2018
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